U.S. Homebuying Slumps to Lowest Point Since 1990s as Affordability Crisis Deepens

America’s housing market has hit its lowest point in homebuying activity since the mid-1990s, according to the latest findings from the Harvard Joint Center for Housing Studies. The annual report, The State of the Nation’s Housing 2025, paints a sobering picture: rising interest rates, record home prices, and growing household expenses are pushing the dream of homeownership further out of reach for millions.

At the same time, mounting rent burdens, property tax hikes, and costly insurance premiums are squeezing both renters and homeowners alike creating what the report calls a “multi-dimensional affordability crisis.” Meanwhile, wildfires and climate disasters continue to disrupt housing security in high-risk regions.

Chris Herbert, the Center’s Managing Director, said the country needs a unified and urgent response: “Without decisive action, we risk long-term harm to the economy and leave too many families without access to safe, affordable housing.”

Renters Facing Historic Cost Burdens

Half of all U.S. renters about 22.6 million households are now paying more than 30% of their income on rent and utilities, the threshold typically used to define a cost burden. Even more concerning, over 12 million are spending more than half their income just to keep a roof over their heads.

What’s new is how widespread this strain has become. Incomes between $45,000 and $74,999 once considered middle class are now seeing burden rates above 45%, double what they were just a few years ago.

Homeowners Not Immune from Rising Costs

Owners are feeling the squeeze, too. In 2023, the number of cost-burdened homeowners jumped by over 600,000, reaching 20.3 million households about one in four. Increases in property taxes and home insurance premiums are a big part of the problem. Premiums alone have surged by 57% since 2019, especially in states prone to wildfires, hurricanes, and flooding. In some places, insurers are pulling out entirely, leaving homeowners with fewer and more expensive options.

Skyrocketing Home Prices Shrink Buyer Pool

With home prices up nearly 60% since 2019, the median single-family home in 2024 hit $412,500—five times the national median income. That’s far above the 3-to-1 price-to-income ratio once considered a healthy benchmark for affordability. As a result, existing home sales have fallen to their lowest point in three decades.

Daniel McCue, a senior research associate at Harvard, explained: “It’s no longer just about prices rising—it’s about how far out of reach they’ve become. The typical mortgage payment today is more than double what it was just five years ago.”

Builders Shift Gears With Smaller Homes, Incentives

Despite declining sales of existing homes, new home sales inched up 3% last year. Builders are adjusting: the average size of newly built homes shrank for the third year in a row, and many developers are now offering mortgage buydowns and financial incentives to help buyers close deals.

Barriers to Ownership Fuel Rental Demand

First-time buyers now need to earn $126,700 a year to afford a median-priced home with a standard FHA loan yet fewer than 6 million of America’s nearly 46 million renters meet that income threshold. The result? A growing number of households remain renters, even as rents rise.

In 2024, the U.S. added 848,000 renter households, helping to absorb a wave of new apartment construction. Developers completed more than 600,000 new multifamily units last year, the highest volume in nearly 40 years. But most of that supply is geared toward higher-income renters, not those in need of affordable options.

Federal Cuts Threaten Homelessness Efforts

The homelessness crisis is escalating. As of January 2024, more than 770,000 people were experiencing homelessness nationwide a 33% jump since 2020. Programs like “Housing First” have shown success in cities such as Houston and Milwaukee, but delayed federal funding and staff cuts threaten the continued rollout of these interventions.

“Many local solutions are working, but without timely funding and sustained support from Washington, these efforts risk losing ground,” the report warned.

External Forces Cloud Housing Outlook

A perfect storm of policy shifts, economic pressures, and global events is now shaping the future of U.S. housing. Recent tariffs on building materials are expected to raise the cost of constructing new homes by an average of $10,900 per unit. Meanwhile, declining immigration is worsening the labor shortage in construction roughly one-third of the industry’s workforce is foreign-born.

If federal support continues to dwindle, experts warn, state and local governments will bear the burden of closing the housing gap. And as demand continues to outpace supply, without major structural reforms, the affordability crisis is likely to worsen. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.